PLM versus ERP - which comes first?

During large-scale digital transformation initiatives, consumer goods companies sometimes need to deploy both a new ERP and a new PLM solution. But which system should be implemented first? Some believe PLM should come before ERP. Others start with ERP, then take on PLM. Which way is better?

Before we dive into this topic, let me point you to an earlier blog I wrote that discussed the nature of these applications and how to integrate them. The implementation of these solutions is quite different. PLM projects tend to be shorter. They have a targeted audience - basically designers and engineers. You can start deploying PLM for one product group. Your go-live can be aligned with a season. You can gradually increase the scope to cover other product groups.

On the other hand, ERP projects tend to be longer. They have a large user base cutting across financials and operations. It is generally hard to deploy it for a product group. Most prefer to deploy it by company, division, region, etc. Your go-live can be aligned with a fiscal period.

For the integration to work, both software packages need to agree on the structure of the product and reference data. Since PLM is flexible and ERP is structured, the integration specifications are mostly driven by the ERP side. PLM product data is richer. PLM passes a set of product data to the ERP to enable transactions.

Now, let's look at some scenarios. In the first option, you can start with PLM and then take on ERP. This approach follows the product data flow. The common issue is the integration. Its structure is mostly driven by the ERP. Without ERP in mind, PLM solutions may end up building product structures that are too unstructured for ERP to consume. PLM is flexible and the users can take the solution anywhere without guidance.

The second option is to start with ERP and then deploy PLM. This may seem reasonable, but there is an issue with an opportunity cost. ERP projects take much longer. PLM would need to wait for ERP. Value delivery would be significantly delayed.

I found a third option that works best. Start PLM and ERP simultaneously. ERP can introduce some structure to the PLM. PLM can build on that structure and go live earlier - mostly by product line and by season. Integration is not live at this point, but it is built with ERP in mind. ERP comes toward the end. The total integrated solution will go live with the ERP go-live. Since the user base is different, the main constraint with this approach is the IT team bandwidth. Running two major projects simultaneously with multiple phased go-lives may be challenging. If you can manage it properly, you may deliver value early and ensure the total solution will work in the end.

If you are interested to learn more, please connect with me on LinkedIn, follow me on Twitter, or watch me on YouTube.

My name is Cem and this has been another gem.